Arch Capital Group Ltd. Q1 FY2026 earnings call

• Strong quarter with after-tax operating income of $901 million, or $2.50 per share, and annualized net income return on average common equity of 17.8%. - Market is competitive but rates and terms still support strong returns; need to actively manage portfolio. - Insurance segment had favorable underwriting income despite flat top-line growth, with growth opportunities in some areas but softening rates in others. - Reinsurance segment's team actively manages portfolio mix. - Mortgage segment had strong underwriting income with excellent credit quality. - Repurchased $7.83 million worth of common stock in 1Q2026 while increasing book value per share by 1.7%. - Completed data and system migration of acquired middle market commercial business from Allianz to Arch-owned systems in 18 months.

Insurance segment: Generated $66 million of underwriting income in 1Q2026, with gross premiums written growing 2% and net premiums written declining 1.4% year over year. Underwriting income was $441 million, a significant increase from $167 million in 1Q2025. Reinsurance segment: Had pre-tax underwriting income of $441 million, gross premiums written down 2.3% and net premiums written down 6% year over year. Mortgage segment: Delivered $221 million of underwriting income, with mortgage originations picking up modestly but affordability challenges still present. Investments: Contributed $4.8 million, or $1.13 of net investment income per share in the quarter, with a nearly $48 billion investment portfolio.

Q: On PropertyCat on reinsurance side, expectations for mid-year renewals and cat load.

A: Don't have crystal ball, expect market to remain competitive, monitor property cat through 50 zones.

Q: On casualty side, best growth opportunities.

A: Optimistic on casualty, like specialty casualty, excess and surplus line casualty, stay away from some areas.

Q: Update on insurance book rate vs trend in US and internationally.

A: US broadly getting rate at trend, casualty lines above trend, short tail property lines below trend; international markets have short tail line rate pressure.

Q: Reinsurance supply and growth opportunity in casualty re.

A: Mainly talking about quota shares, like specialty casualty business but facing ceiling commissions and excess supply.

Q: Share repurchases and cyber insurance.

A: No structural limitations on share repurchases, cyber insurance at around 3 p.m. in underwriting clock, AI seen as acceleration of cyber attack speed and scale.

Q: Outlook on loss ratios and mid-core acquisition.

A: Confident in managing cycle, margins sustainable for near future, mid-core acquisition fruits to play out more in 2027.

Q: Premium leverage and terms and conditions.

A: Managing equity side of leverage, returning capital if can't deploy, seeing more aggregates and structures in property cat reinsurance.

Q: Managing OpEx as potential margin boost and mortgage insurance loss ratio.

A: Looking at managing OpEx, mortgage insurance loss ratio affected by average loan size.

Q: Exposure to private credit and using AI in mid-corp technology rollover.

A: Limited exposure to private credit, AI helped in coding and testing during mid-corp technology rollover.

Q: Operating expense in reinsurance and exposure to Iran-related losses.

A: Operating expense up from last year, exposure to Iran-related losses in political violence and war on land lines, estimated premium around $2 billion.

Q: PMLs and property reinsurance/insurance.

A: PMLs stayed same, Florida zone still green, 6-1 and 7-1 renewals may have more significant changes.

Q: Casualty sidecars and Iran-related losses.

A: Casualty sidecars may have mitigation factor compared to PropertyCat, Iran-related losses priced in.

Q: Iran-related losses breakout and insurance book other liability claims made line.

A: Don't break out Iran-related losses by insurance and reinsurance, other liability claims made line driven by higher pricing and M&A activity